Saturday, June 26, 2010

Our Iceberg is Melting...

The book of the week was Our Iceberg is Melting by John Kotter. Interesting book written about organizations going through change. I'm not sure why I was attracted to this book, but it may have something to do with the fact I was in Missouri for the last week and a half with temperatures over 100 degrees everyday... and this book had icebergs on the cover. In any case, the book was very good. It is a lot like the book Who Moved My Cheese by Spencer Johnson in the way it gives a fable to illustrate how to change an organization.

Change is a very important concept. Understanding it and knowing when to do it are very important as well. It is human nature to resist change. It's in our nature to want to keep the status quo and continue on with what your doing. However, as we all know, especially in recent years, we cannot plan on everything staying the same forever. If you turn a blind eye to what is happening around you you'll eventually have to pay the consequence... your iceberg will sink.

This book was focused around a colony of penguins and one particular penguin recognized the signs of the iceberg starting to melt. The rest of the book was about him getting everyone on board with what he recognized and making the change needed so all the penguins didn't go under with the iceberg. After much prodding, the majority of the colony was on board with accepting the change needed. There were some penguins that were always negative and we have all experienced other people that are like that. They just worked around these penguins and made changes anyway. Eventually the penguins moved to a different iceberg and than another until they found the perfect one. The first change was a challenge but moving to another iceberg after that was much easier.

The focus of the book was on The Eight Step Process of Successful Change...

Set the Stage

1. Create a Sense of Urgency- Help others see the need for change and the importance of acting immediately.

2. Pull Together the Guiding Team- Have a powerful group guiding the change- leadership, credibility, communication, authority, analytical- these are all important qualities to get into the team.

Deciding What to Do

3. Develop the Change Vision and Strategy- Clarify how the future will be different from the past and how you can make the future a reality.

Making it Happen

4. Communicate for Understanding and Buy In- Make sure as many others as possible understand and accept the vision and strategy.

5. Empower Others to Act- Remove as many barriers as possible so that those who want to make the vision a reality can do so.

6. Produce Short-term Wins- Create some visible, unambiguous successes as soon as possible.

7. Don't Let Up- Press harder and faster after the first successes. Be relentless with initiating change after change until the vision is a reality.

Make it Stick

8. Create a New Culture- Hold on to the new ways of behaving, and make sure they succeed, until they have become strong enough to replace old traditions.

These 8 steps are great! Study them and use them to create change... The book was short and covered the material in a very effective way. If you have any interest in making changes to an organization you are a part of this book would probably be a big help. As always, if you have any questions on the book don't hesitate to ask. I would be more than happy to help anyone that wants it.

Saturday, June 19, 2010

The Advanced Guide to Real Estate Investing...

The book of the week was The Advanced Guide to Real Estate Investing by Ken McElroy. I think I may have a slight obsession toward real estate books because no matter how many times I read them, I never get bored and I always pick up another tip or remind myself of one I may have forgotten. And... McElroy is one of my favorite authors on the subject. He gives it to the readers straight and concise. I appreciate a person that doesn't need to add a lot of fluff to their writings.

This week's book was, like last week's post, a sequel book. The first book the correlates to this book is The ABC's to Real Estate Investing. I reviewed it last July... let's look at the bulk of that post before we get started on this one:

"I know that after reading this book I could make six figures in the business of real estate investing in 5 years or less. The first step is exactly that: Making a goal for yourself. Tell yourself that you want to make more than $100,000 annually in 5 years in multi-unit real estate investing. The goal you set for yourself has to measurable- "over $100,000", Time based- "5 years", and specific- "multi-unit real estate investing."

And now that you have your goal, it is time to hit the ground running. You will need to find a team because great things are seldom done alone. You will want a lawyer, accountant, engineer, etc. People that you can turn to and ask questions when they arise during your research. Another great thing about having a team to help you with your real estate dreams is you have people to keep you accountable. If you have ever worked out.. weight-lifting, running, or biking. You know it is so much easier to succeed when you have a partner to help you through.

You will then have to go out and find your ideal real estate. McElroy line-items just about everything you will need to look for when you are researching. This can be a fun time. Once you find the right property for you, this book will tell you how to find the "right" asking price. In the book there are detailed guides to writing your letter of intent to your buyer and how to go through the final process of acquiring your property.

After you have your property you will need to decide if you are going to be the property manager- the person that handles the landlord duties- or are you going to outsource that job to property management company. I recommend outsourcing for any property over 8 units. Let someone else handle the rent checks, leaks, broken appliances, flooding, evictions, background checks, criminal checks and the list goes on. Outsourcing this job will allow you to work on researching other properties or continuing career goals. Property management companies will charge between 8% and 14% depending on the number of units and the company. However, remember that like all things, you get what you pay for.

As you venture into this new world of Real Estate Investing you may start small with a duplex or a small apartment complex. If you follow the guidelines laid out in this book you will have a steady cash flow to reinvest in new larger properties. The goal that I previously outlined in this review is not far-fetched. If you are motivated, put the excuses aside, believe in yourself, and really go for it you can reach this goal. In the current economy you have a goldmine of opportunity. Go do some research and put yourself out there. Interest rates are low and everybody is selling. It's a buyer's market, so take advantage!"

You can see how much the original book got me psyched up. This one got me pretty excited too. I know that when I start to lose a little bit of fire, I can read a Rich Dad series book and get myself refocused and back on track mentally. And trust me, it's needed sometimes. When you start to think big and do big things, you will have everyone tell you that you shouldn't try and you need people around you to encourage you... even if some of those people are authors with words inside a book.

In the Advanced Guide, McElroy is thinking even bigger. He writes about multi-family investing on a very large scale. The buildings talked about in this book range from 100-400 units. That is very large, especially if you haven't done any real estate investing yet. However, I think that large apartment complexes are the right way to go after you get your feet wet. When you have large apartment complexes you will most likely purchase the place with an on-site management company. This is a huge perk because it allows very close management of the property. If you have a ton of duplexes you don't have the luxury of on-site management, meaning bad tenants (heaven forbid you end up with very many) can get away with more bad things.

Additionally, the purchasing power you can muster when you buy a large apartment complex can be staggering. Investors are more likely to invest one big lump sum instead of the same amount invested over 50 different duplexes at different times. Besides the amount of time you would be consuming to get 50 different meeting times with managers to show them due diligence on each property. You would have to somehow find the time to do due diligence on 50 difference duplexes. It just makes more sense in terms of efficiency to consolidate your efforts into one sure-fire investment.

I do think that if you are planning to do a big project like the ones outlined in this book that you need to first start small. This is what I call getting your feet wet. Go ahead and save a sizable amount of money for a down-payment. Depending on where you live anywhere from $5-15k will work. Then find some nice duplexes or fourplexes, do your due diligence on each property and work with your team to determine whether it is a good investment and then go for it. The most difficult thing for people during all of this is taking the "risk." Well, if all the numbers work out and your team feels good about it. The "risk" is probably much more minimal than you think. I encourage you all to get your feet wet and go for it... You will be taking one big step toward financial freedom and the ability to live the lifestyle you desire.

I think this book was a great sequel and I encourage you to pick it up and give it a read if you have the courage to give it a try. Again, McElroy is a great author and I have loved every book I have read by him and I think you will feel the same. As always, if you have any questions on the book don't hesitate to ask. I would be more than happy to help anyone that wants it.

Saturday, June 12, 2010

Flipping the Switch!

The book of the week was Flipping the Switch by John G. Miller. I couldn't go much longer without reading another book by Miller. This book is very much focused on the principles of QBQ - Question behind the question. It takes the original book and channels the concept into results in several categories: Learning, Ownership, Creativity, Service and Trust. Let's start with the bulk of my original posting on QBQ!, Miller's original book on the subject.

"Miller really knows how to tell a story. The book in incredibly easy to read and hard to put down. Some examples of "bad" questions are:

-"Why don't customers follow instructions?"
-"Who made the mistake?"
-"Why doesn't anyone else do as much work as me?"
-"Why don't I get paid more?"

Some better questions to ask yourself would be:

-"How can I serve the customer better?"
-"What can I do today to be more effective?"
-"How can I be a more effective coach?"
-"What can I do to be more productive?"

Notice anything about the second set of questions? They start with How and What instead of Why or Who or When. They focus on "I" instead of them, they, or someone else. And most importantly they focus on action. To get ahead in this world there is only one person that can be changed, and that's YOU. If you focus on asking questions dedicated toward making yourself better you will be much better off than someone that is asking questions about procrastination or complaining.

Some of the stories in this book were very entertaining. One story that really incorporated the skills I try to push into people's lives through this blog goes like this: A man stopped at Rock Bottom restaurant in downtown Minneapolis. The place was packed and a boy holding a bunch of plates noticed the man hadn't been helped yet, so he took it upon himself to help the man. He asked what the man wanted and the man said he just wanted a salad and a couple of rolls. The boy said it would be right out. And then the man asked if he could get a Diet Coke as well. The boy said they didn't serve Diet Coke, just Pepsi products. The man was fine with this and carried about his lunch. After a little bit of time the man was greeted with an ice cold Diet Coke. The man said "I thought you didn't carry Diet Coke." The boy said "We don't, but they have it at the convenience store across the street". The man asked who went and got it because the boy was way too busy and boy replied "My Manager."

There are so many great things about this story. Most people would have said "Why should I have to get a Diet Coke when we have Pepsi?" or "Why should I serve that man, he isn't sitting in my area?" or "Why are we so short staffed?" The boy didn't say any of those things, he just acted. He did what it took to make the customer happy, true customer service. Aside from the outstanding customer service from the boy, I also want to mention the manager. The manager is a true leader. He let his employees make the decision and then he acted. This is a fantastic sign of a successful organization."

I really like that story. QBQ! is about personal accountability. If you ask the right questions you will ultimately be more efficient. If you ask the wrong questions you lean toward gossip and the "blame game." Now, watch this video of John G. Miller speaking at several organizations. Please take the time to watch the whole thing, lots of great ideas here. The key is Personal Accountability!

I would say the biggest thing I took away from Flipping the Switch was within the portion on Learning. It is really easy to use, what Miller refers to as, Exclusion. Meaning, that you reject someone's ideas from the get-go because of who they are. They might be a child or a rookie within the company or even a family member. Sometimes you think because you have been involved in something for a longer period of time, you have all the basic answers to problems. It may take some deliberate thinking on your part not to dismiss their ideas, but I bet if you do give a listen to even the most novice people they might have the answer you are looking for. And a lot of the time, the best answer lies with the simplest of ideas.

I'm not going to write about every category today because a lot of them are based around some longer stories that taken out of context won't do you much good. However, I encourage you to pick up this book and the previous one if you haven't done so already. Miller is a very bright man and I look forward to reading his next book. As always, if you have any questions on the book don't hesitate to ask. I would be more than happy to help anyone that wants it. 

Saturday, June 5, 2010

The ABC's of Property Management...

The book of the week was The ABC's of Property Management by Ken McElroy. This is another book from of the Rich Dad series, a series that I am a huge fan of. It's not the first book I've read by McElroy either. He is a great writer and gives all types of great information about the real estate sector. This book was clearly about property management and I found it very helpful.

I think the most helpful aspect of this book is that it opens your eyes up to the work that goes into property management. It's a big decision whether or not to manage your property yourself or have someone else do it. The largest incentive to self-managing is decreasing expenses and thus increasing cash flow. However, when you dive deeper into self-managing, you could potentially do more damage and cost yourself more money in the long-run due to lack of experience and know-how.

There are several things that could cost you money in the long-run by self-managing. It could be legal fees because you didn't follow the right protocol when evicting someone. It could be maintenance fees because you tried to fix something yourself and didn't have the skills or didn't keep up with preventative maintenance like you should have. And maybe worst of all, it could be the cost of physical vacancy because you don't have the resources to get the right tenant into an apartment within a reasonable amount of time.

Property management is a full-time job for people for a big reason- it's a lot of work! One of my favorite investments is cash flowing real estate, but it is important to know when your abilities cease to be effective and where a professional management company should step in and help out. But don't get me wrong, I don't think that property management isn't something that can be done alone. It all depends on the size of the property and your time-constraints. If you have invested in a duplex and you live a few miles away from it, it would make sense to self-manage it. And I think it's really good experience for anybody going into real estate investing. However, if you have a 30-unit apartment building a couple miles away you'll have to really think about the pros and cons of self-managing. If you are like me and have a full-time job it would be very difficult to manage it effectively without exhausting yourself completely in the process.

McElroy has a great system for researching a property management company in the book. It has 3 levels of research that I will summarize real quick. Level 1 you will search the internet for the companies and get yourself a good list with any background information you can dig up on them. Then with Level 2 you can visit the companies. Take a look around their operation, ask about their staffing, maintenance connections, and the accounting program they are using and, lastly, ask for a list of the properties they already oversee. Secret shop these properties and look for cleanliness of the property, effectiveness of local management, availability of rental resources... depending on the property, you may have more things to investigate like a clubhouse, a pool, mailboxes, etc. Then with Level 3 you take your data to your team and ask what they think. They could be your lawyers, friends in property management, accountant, anyone that may have some insight on your big decision.

A really great resource for real estate is at Ken McElroy's website at It has all types of great sample forms that help give the scope of property management.

I recommend this book to anyone that is going into real estate investing. It has all kinds of signature Rich Dad tips that all help to maximize your cash flow. As always, if you have any questions on the book don't hesitate to ask. I would be more than happy to help anyone that wants it.